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Kroger (KR) Rolls Out On-Premise Kitchens With ClusterTruck

Zacks Equity Research
·4 min read

The Kroger Co. KR in collaboration with ClusterTruck, is launching two on-premise ghost kitchens across its stores in Metro Indianapolis, IN and Metro Columbus, OH. The on-premise kitchen streamlines ordering, preparation and delivery, thus enabling Kroger to efficiently cater to growing customer demand for quick, fresh, restaurant-quality meals.

With the help of ClusterTruck, a technology start-up that operates delivery-only restaurants, the company will be able to offer on-demand and freshly prepared food from a menu of over 80 meals without any service or delivery fee. The recent development came after a successful pilot rolled out in December last year in Carmel, Indianapolis and Columbus.

While Kroger's first on-premise kitchen is now open in Fishers, IN, the next one is about to be opened in Dublin, OH. Unlike the off-premise perception, the on-premise kitchen will dedicate nearly 1,000 square feet at each participating store for a culinary space, where ClusterTruck staff will cook meals for fast delivery and in-store pickup. This extension of Kroger's partnership with ClusterTruck mirrors the former’s commitment to make investments in diverse fresh food options with an aim to offer a seamless experience to its customers. Through the latest expansion, Kroger will provide its customers freshly prepared meals with the charisma of street food.

Being a pioneer in ghost kitchens, ClusterTruck operates delivery-only kitchens or dark kitchens, and has a software system that uses custom algorithms to optimize kitchen and delivery functions. This also eliminates the third-party delivery model. The Indianapolis-based ClusterTruck's approach to meal delivery ensures the company delivers all orders to customers within nearly 7 minutes of preparation and less than 30 minutes of ordering on average.

We note that Kroger has also been benefiting from its acquisitions of meal-kit provider Home Chef, and British online grocery-delivery company Ocado. The company also expanded its Home Chef Express meal kits nationwide. In July 2020, Home Chef collaborated with Impossible Foods. With this collaboration, Home Chef became the first meal kit-delivery company that offers Impossible Burger. Moreover, the deal with Ocado has been reinforcing the retailer’s position in the online ordering, automated-fulfillment and home-delivery space.

In a separate release, Kroger Health, the company’s healthcare division, has renewed its collaboration with GoodRx Holdings, Inc. for a span of three years. This extension will allow consumers to continue using Kroger Rx Savings Club program for availing discounts while buying prescription drugs. The Kroger Rx Savings Club offers discounts on generic medications for diabetes, asthma, mental issues and women’s health concerns, among others. The program reduces the price of such medications, giving up to 85% savings on various prescriptions.


 

We note that Kroger has been making every effort to strengthen its position not only with respect to products, but also in terms of the way consumers prefer shopping for grocery. Notably, the company’s Restock Kroger program, involving investments in omni-channel platform, identifying margin-rich alternative profit streams, merchandise optimization and lowering of expenses, has been gaining traction. A glimpse of this Zacks Rank #2 (Buy) company’s price performance so far this year reveals that it has increased 18.3% compared to the industry’s 17.6% rally.

More Key Picks in Retail

Target TGT has a long-term earnings-growth rate of 7.2% and currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Walmart WMT has a long-term earnings-growth rate of 5.6% and a Zacks Rank #2 (Buy).

Big Lots BIG, also a Zacks Rank #2 stock, has delivered an earnings surprise of 54.4% in the last four quarters, on average.

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